You’re finally ready to take the plunge and put in an offer on your dream house. You found something that is perfect for you and your family’s needs and you’re willing to pay the asking price. It’s a sure thing, right? Not so fast.
Compared to a buyer’s market, a seller’s market means that there are more buyers than there are homes available for sale. It may mean that your full-price offer just isn’t going to cut it. So, what can you do to get that perfect house you’ve searched for high and low? These tips might push your offer to the front of the line.
If You’re Financing the Home Purchase – Opt in to Provide a Full Approval with your Offers, not just a Pre-Approval
A fully underwritten approval provided with your offers will communicate with both the listing agent and seller that you are 100% approved for financing and have waived all financing contingencies. A full approval is the next best thing to cash since you’ve received the green light from your lender that you’re fully approved for the loan, not just “pre-approved”. With a full approval – the only thing that could go wrong with the loan is if the appraisal came in bad or if there were significant issues with the property.
Make Your Offer As Clean As Possible
A clean, no-contingency offer means that you’re waiving all contingencies in order to make your bid a bit more competitive and appealing to the seller. A clean offer should not be contingent on the sale of another property or have other financial constraints. It should also be free of seller concessions, which are things that a buyer asks for outside of the offer price, such as help with closing costs. When a seller is receiving a ton of bids, choosing to make a clean offer can help you beat out other offers with contingencies.
Avoid Asking For Personal Property
Drooling over the sparkly chandelier listed in the exclusions? Don’t ask for it. Want them to throw in that cool lawn furniture? Skip it. Your offer could be very similar in price to another offer that isn’t asking for items that belong to the seller. Asking for excluded items could weaken your offer.
The seller’s market is not the place for making low offers and hoping someone will bite. You will have to make your offer strong enough to beat out a multiple-bid situation. If you want the house, you’re likely going to have to go above the asking price.
Don’t allow the thought of offering over the asking price overwhelm you. Sometimes, you only need to offer $2,000 – $3,000 more to get the seller’s attention. Doing this will show the seller that you’re serious about buying the home, and that you want them to consider you as a potential buyer.
Making an offer above the asking price won’t end up costing you much in the long run. What you put down and what you pay monthly on your mortgage will only change significantly if you offer an amount far above asking. Keeping your offer aligned to the home’s value, while still above the asking price, will help you secure the home you’re interested in.
Put Down A Stronger Earnest Money Deposit (EMD)
Your earnest money deposit is proof that you are a good-faith buyer. Usually, the real estate broker will hold onto your EMD and put it in an escrow account. Later on, your EMD can contribute to your down payment and closing cost. On average, EMDs are about 1 – 3% of the purchase price of the home. If you put a larger amount down, it may show that you are a serious buyer and that your intentions are genuine.
But, if you do put more of an EMD down, make sure you intend to buy the home. If you don’t end up moving forward with the purchase, your EMD may be in jeopardy. If you’ve already signed the contract and don’t buy the home, the seller could keep your EMD as compensation for the time wasted.
This is a huge one in neighborhoods that are experiencing a resurgence in property values or gained interest. An offer indicating your intention to bring money to the table if the home doesn’t appraise will definitely set you apart from the others. Just make sure you are in a strong financial position to take this risk.
Make A Larger Down Payment In Your Loan Program
No matter what type of loan you choose, offering to pay more down is another sign of good faith to your seller. Anytime you can showcase that you’re in a good financial position, you should do so. By putting down a larger down payment than you have to, you send the message that you’re serious about the purchase and capable of meeting all financial obligations.
Add An Escalation Clause To Your Offer
An escalation clause means that your offer will outbid other offers up to a maximum price. This means that you make an offer saying you will pay $X price for a home, but if a higher offer comes in, you will increase your offer to $Y price.
Keep in mind, even if you provide an escalation clause, it may be in the sellers’ best interest to issue a counteroffer. A counteroffer is in place of accepting your escalation clause offer. The seller may also decide to raise the list price instead of providing a counteroffer or accepting an escalation clause.
If you decide to move forward with this option, consult with a lawyer before you submit your offer. Your lawyer will be the one who writes this clause into the contract.
Pay With Cash
In a competitive seller’s market, buying a home with cash can be a smart move. It can make your offer look even more appealing to a seller who wants to quickly finalize the deal. A cash offer can also help you avoid the extra fees and interest that come with taking out a mortgage.
Michael R. Santana, real estate attorney at GrayRobinson Law Firm, states, “Cash offers also have the important effect of keeping the deal primarily between the buyer and seller – they call the shots and not some stranger at a bank.”
Make Sure Your Offer Is Complete
Paying attention to the details of your offer should be a no-brainer, but every day there are mistakes made in this process. This may include missing disclosures, EMD or pertinent information for the purchase agreement. In a competitive market, mistakes like these may result in your offer getting tossed.
If a seller receives multiple offers that are complete, they may not give your offer a second look. If you want to make sure you have a chance in the running, make sure to cross your “t’s” and dot your “i’s”.
When purchasing a home with a mortgage, your payment isn’t due until a month after your closing date. Why not offer your payment early to sweeten the deal? A seller could benefit from you paying “rent” for a month, and this may strengthen your offer
But, if you do decide to offer one month of free occupancy, make sure you discuss all of the details beforehand. It’s wise to have this agreement in writing so guidelines are clear and concise. You don’t want to find yourself an unwelcome house guest for an indefinite amount of time.
The Bottom Line: Make Your Offer Stand Out
There’s a lot to consider when navigating a seller’s market and placing an offer on a home. It’s important to act quickly when you find the perfect house, while also taking the necessary steps to ensure your offer stands out among the competition. Showing the seller that you’re a serious buyer who’s willing to go the extra mile, both in your intention and financial offerings, can make your offer that much more desirable.
Set yourself up for having your offer accepted on a home by getting preapproved for a mortgage prior to your home search. This not only helps you understand how much house you can afford, but it can give you additional credibility with the seller as they consider your offer.